In the Matter of
READING STATE BANKREADING, KANSAS(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-02-086b

Reading State Bank, Reading, Kansas ("Bank"), having
been advised of its right to a NOTICE OF CHARGES AND OF HEARING
detailing the unsafe or unsound banking practices and violations of law
and regulations alleged to have been committed by the Bank, as well as
of its right to a hearing on the charges under section 8(b) of the
Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b), and
having waived those rights, entered into a STIPULATION AND CONSENT TO
THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT
AGREEMENT") dated August 1, 2002, with counsel for the Federal
Deposit Insurance Corporation ("FDIC"), whereby, solely for the
purpose of this proceeding and without admitting or denying the charges
of unsafe or unsound banking practices and violations of law and
regulations, the Bank consented to the issuance of an ORDER TO CEASE
AND DESIST ("ORDER") by the FDIC.

The FDIC considered the matter and determined that it had reason to
believe that the Bank had engaged in unsafe and unsound banking
practices and violations of law and regulations. The FDIC, therefore,
accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

IT IS HEREBY ORDERED, that the Bank, its institution-affiliated
parties, as that term
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is defined in section 3(u) of the Act, 12 U.S.C.
§1813(u), and its successors and assigns, cease and desist from the
following unsafe or unsound banking practices and violations of law and
regulations:

A. Operating with management whose policies and practices are
detrimental to the Bank and jeopardize the safety of its deposits.

B. Operating with a board of directors that has failed to provide
adequate supervision over and direction to the management of the Bank.

3. the failure to obtain current and complete financial information;
and

4. the failure to analyze and document borrower repayment ability.

D. Operating with an excessive level of adversely classified loans
and an excessive level of special mention loans.

E. Operating with an inadequate loan policy.

F. Failing to identify problem credits and operating with an inadequate
allowance for loans and lease losses for the volume, kind, and quality
of loans and leases held, and failing to make provision for an adequate
allowance for possible loan and lease losses.

G. Operating with inadequate liquidity in light of the Bank's asset
and liability mix, including, but not limited to, operating with an
excessive volume of higher cost, out-of-territory, deposits.

H. Operating with an inadequate funds management policy.

I. Operating with inadequate policies and procedures to monitor and
control interest rate risk.

Bank, its institution-affiliated
parties, and its successors and assigns, take affirmative action as
follows:

[.1]1. MANAGEMENT. For purposes of this ORDER, the qualifications of
management shall be assessed on its ability to comply with the
requirements of this ORDER, operate the Bank in a safe and sound
manner, comply with applicable laws and regulations, and restore all
aspects of the Bank to a safe and sound condition, including asset
quality, capital adequacy, earnings, management effectiveness,
liquidity, and sensitivity to market risk. Furthermore, "senior
executive officer" shall be defined as in section 32 of the Act, 12
U.S.C. §1831(i), and section 303.101(b) of the FDIC Rules and
Regulations, 12 C.F.R. §303.101(b). Each member of Bank management
shall have qualifications and experience commensurate with his or her
duties and responsibilities at the Bank.

a. During the life of this ORDER, the Bank shall notify the
Regional Director and the State Bank Commissioner, in writing, of the
resignation or termination of any of the Bank's directors or senior
executive officers.

b. Prior to the addition of any individual to the board of
directors or the employment of any individual as a senior executive
officer, the Bank shall comply with the requirements of section 32,
supra, and Subpart F of Part 303 of the FDIC Rules and Regulations, 12
C.F.R. §§ 303.100303.104.

c. During the life of this ORDER, the Bank shall retain qualified
management.

d. Within 60 days from the effective date of this ORDER, the Bank shall
develop and complete a plan ("Management Plan") for the purpose
of providing qualified management for the Bank.

e. The Management Plan shall include, at a minimum:

i. identification of both the type and number of officer
positions needed to properly manage and supervise the affairs of the
Bank;

ii. identification and establishment of such Bank committees as are
needed to provide guidance and oversight to active management;

iii. evaluation of all Bank officers and staff members to determine
whether these individuals possess the ability, experience and other
qualifications required to perform present and anticipated duties,
including adherence to the Bank's established policies and
practices, and restoration and maintenance of the Bank in a safe and
sound condition; and

iv. a plan to recruit and hire any additional or replacement personnel
with the requisite ability, experience and other qualifications to fill
those officer or staff member positions identified in the Management
Plan.

f. Upon completion of the Management Plan, it shall be submitted to
the Regional Director and the State Bank Commissioner for review and
comment. Within 30 days of the receipt of any comments from the
Regional Director and after due consideration of any recommended
changes, the board of directors of the Bank shall meet, approve the
Management Plan, and record the approval in its minutes for the
meeting. Any subsequent modification of the Management Plan shall
require submission to the Regional Director for review and comment
prior to approval by the Bank.

[.2]2. INDEPENDENT DIRECTORS. The addition of any new Bank directors
required by this paragraph may be accomplished, to the extent
permissible by state statute or the Bank's by-laws, by means of
appointment or election at a regular or special meeting of the Bank's
shareholders. For purposes of this ORDER, an independent director shall
be any individual who is not an officer of the Bank, any subsidiary, or
any of its affiliated organizations; who does not own more than 10
percent of the outstanding shares of the Bank; who is not related by
blood or marriage to an officer or director of the Bank or to any
shareholder owning more than 10 percent of the Bank's outstanding
shares and does not otherwise share a common financial interest with
such officer, director or shareholder; who is not indebted to the Bank
directly or indirectly, including the indebtedness of any entity in
which the individual has a substantial financial interest, in an amount
exceeding 10 percent of the Bank's total Tier 1 capital and allowance
for loan and lease losses; or who is deemed to be an independent
director for purposes of this ORDER by the Regional Director.
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a. Within 90 days from the effective date of this ORDER, the
Bank shall add two new independent members to its board of directors.
The Bank shall document its efforts to contact potential candidates for
those positions, and the results of those contacts.

[.3]3. MONTHLY BOARD MEETINGS. During the life of this ORDER, the Bank's
board of directors shall meet at least monthly. The board shall prepare
in advance and shall follow a detailed written agenda at each meeting,
which shall include consideration of actions of any committees. Nothing
in the foregoing sentence shall preclude the board from considering
matters other than those contained in the agenda. Detailed written
minutes of all board meetings shall be maintained and recorded on a
timely basis.

[.4]4. LOAN POLICY. Within 30 days from the effective date of this ORDER,
and annually thereafter, the board of directors of the Bank shall
review the Bank's loan policy and procedures for adequacy and, based
upon this review, shall make all appropriate revisions to the policy
necessary to strengthen lending procedures and abate additional loan
deterioration.

a. The initial revisions to the Bank's loan policy required by
this paragraph, at a minimum, shall include provisions:

i. establishing review and monitoring procedures to ensure
that all lending personnel are adhering to established lending
procedures and that the directorate is receiving timely and fully
documented reports on loan activity, including any deviations from
established policy;

ii. requiring that all extensions of credit originated or renewed by
the Bank;

A) be supported by current credit information and collateral
documentation, including lien searches and the perfection of security
interests;

B) have current financial information, profit and loss statements or
copies of tax returns, and cash flow projections including an
analysis of repayment ability, which information shall be maintained
throughout the term of the loan;

C) have a clearly defined and stated purpose and a predetermined and
realistic repayment source and schedule;

iii. establishing standards for extending unsecured credit;

iv. prohibiting the extension of a maturity date, advancement of
additional credit or renewal of a loan to a borrower whose obligations
to the Bank were classified "Substandard" or "Doubtful",
whether in whole or in part, in Regulatory Reports of Examination,
without the full collection in cash of accrued and unpaid interest,
unless the loans are well secured and/or are adequately supported by
current and complete financial information, and the renewal or
extension has first been approved in writing by a majority of the
Bank's board of directors;

v. requiring a non-accrual policy in accordance with the Federal
Financial Institutions Examination Council's Instructions for the
Consolidated Reports of Condition and Income;

vi. addressing concentrations of credit and diversification of risk,
including goals for portfolio mix, establishment of limits with loan
and other asset categories, and development of a tracking and
monitoring system for the economic and financial condition of specific
geographic locations, industries, and groups of borrowers; and

b. The Bank shall inform the Regional Director and the State Bank
Commissioner, in writing, how it intends to ensure compliance.
Thereafter, the Bank shall implement and follow the amended written
loan policy.

[.5]5. REDUCTION OF SUBSTANDARD ASSETS. For purposes of this ORDER and as
used in this paragraph, "reduce" means to collect, charge off, or
improve the quality of "Substandard" assets so as to warrant
removal of any adverse classification by the FDIC. Furthermore, in
developing the plan mandated by this paragraph, the Bank shall, at a
minimum, review the financial position of each such borrower, including
source of repayment, repayment ability, and alternative repayment
sources, and evaluate the available collateral for each such credit,
including possible actions to improve the Bank's collateral position.

a. Within 60 days from the effective date of this ORDER, the Bank
shall adopt and implement a written plan to reduce the Bank's risk
position in each asset in excess of $50,000 which is classified
"Substandard" in the FDIC's April 1, 2002 Report
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of Examination.
Thereafter, the Bank shall implement and follow this plan. A copy of
the plan shall be submitted to the Regional Director and the State Bank
Commissioner upon its completion.

b. The plan mandated by this paragraph shall include, but not be
limited to, the following:

i. the dollar levels to which risk in each classified asset will
be reduced;

ii. a description of the risk reduction methodology to be followed;

iii. provisions for the Bank's submission of monthly written progress
reports to its board of directors;

iv. provisions mandating board review of said progress reports; and

v. provisions for the mandated review to be recorded by notation in the
minutes of the board of director's meetings.

[.6]6. SPECIAL MENTION. Within 60 days from the effective date of this
ORDER, the Bank shall correct all deficiencies in the assets listed for
"Special Mention" in the FDIC's April 1, 2002 Report of
Examination.

[.7]7. TECHNICAL EXCEPTIONS. Within 60 days from the effective date of this
ORDER, the Bank shall correct the technical exceptions listed in the
FDIC's April 1, 2002 Report of Examination. "Correct" shall
include documented attempts to collect missing information. The Bank
shall initiate and implement a program to ensure its credit files
contain complete, adequate and current documentation.

[.8]8. REDUCTION OF CONCENTRATIONS OF CREDIT. Within 60 days from the
effective date of this ORDER, management will review concentrations of
credit in order to identify level of risk. The Bank shall formulate and
adopt a written plan of action to manage the risk of each
concentration. This will be accomplished, where appropriate, through
strengthened administration or risk reduction.

[.9]9. ASSET CHARGE-OFF. Elimination or reduction of assets with the
proceeds of other Bank extensions of credit is not considered
collection for the purpose of this paragraph.

a. As of the effective date of this ORDER, the Bank shall eliminate
from its books, by charge-off or collection, all assets or portions of
assets classified "Loss" in the FDIC's April 1, 2002 Report of
Examination, that have not been previously collected or charged off.

[.10]10. PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS. As of the
effective date of this ORDER, the Bank shall not, directly or
indirectly extend any additional credit to, or for the benefit of, any
borrower who is already obligated in any manner to the Bank on any
extensions of credit (or portion thereof) that has been charged-off the
books of the Bank or classified "Loss", so long as such credit
remains uncollected. Additionally, the Bank shall not, directly or
indirectly, extend any additional credit to, or for the benefit of, any
borrower whose loan or other credit has been classified
"Substandard" or "Doubtful", or is listed for Special
Mention, and remains uncollected, unless its board of directors adopts
a detailed written statement giving the reasons why such potential
action is in the best interest of the Bank. A copy of such statement
shall be placed in the appropriate loan file and shall be incorporated
in the minutes of the applicable board of directors' meeting.

[.11]11. ALLOWANCE FOR LOAN AND LEASE LOSSES. For purposes of this ORDER and
in making the determination mandated by this paragraph, the board of
directors of the Bank shall consider the Federal Financial Institutions
Examination Council's Instructions for the Reports of Condition and
Income, the Interagency Statement of Policy on the Allowance of Loan
and Lease Losses, and any analysis of the Bank's allowance for loan
and lease losses ("ALLL") provided by the FDIC.

a. Within 30 days from the effective date of this ORDER, the Bank
shall replenish its ALLL in the amount of at least $160,000.

b. Within 30 days from the effective date of this ORDER, Reports of
Condition and Income required by the FDIC and filed by the Bank
subsequent to December 31, 2001, shall be amended and re-filed if they
do not reflect a provision for loan and lease losses which is adequate
in view of the condition of the Bank's loan portfolio, and which, at a
minimum, incorporate the adjustments required by this paragraph.

FDIC after the effective date of this ORDER, the board
of directors of the Bank shall review the adequacy of the Bank's ALLL,
and accurately report the same. The minutes of the board meeting at
which such review is undertaken shall indicate the findings of the
review, the amount of increase in the ALLL recommended, if any, and the
basis for determination of the amount of ALLL provided.

d. ALLL entries required by this paragraph shall be made prior to any
Tier 1 capital determinations required by this ORDER.

[.12]12. FUNDS MANAGEMENT PLAN. Within 30 days from the effective date of
this ORDER, the Bank shall submit to the Regional Director and the
State Bank Commissioner, for review and comment, a written plan
addressing liquidity and contingent funding so as to reduce the Bank's
dependence on higher cost, out-of-territory deposits. Within 30 days
from the receipt of all such comments from the Regional Director, and
after due consideration of any recommended changes, the Bank shall
approve the plan, which approval shall be recorded in the minutes of a
board of directors' meeting. Thereafter, the Bank shall implement and
follow the plan.

[.13]13. FUNDS MANAGEMENT POLICY. Within 30 days from the effective
date of this ORDER, and annually there after, the board of directors
of the Bank shall review the Bank's funds management policy for
adequacy and shall make the necessary revisions to address the Bank's
asset/liability and liquidity positions and strategies.

a. At a minimum, the revisions to the policy shall:

i. provide policies and procedures that address funding
concentration in or excessive reliance on any single source or type of
funding, such as brokered funds, deposits obtained through the Internet
or other types of advertising, and other similar rate sensitive or
credit sensitive deposits;

ii. establish a method to measure/monitor rate sensitivity and conform
with the Interagency Statement of Policy on Interest Rate Risk
referenced above in this ORDER;

iii. establish a method to measure and monitor the extent of the
Bank's unfunded loan commitments;

iv. establish an acceptable range for dependence on less stable funding
sources;

vi. establish systems to monitor the interest rates paid on deposits to
determine whether such rates exceed the interest rate limitations set
forth in section 337.6(b)(2) of the FDIC Rules and Regulations, 12
C.F.R. §337.6(b)(2).

b. The Bank's policy, when revised as required by this paragraph,
shall be submitted to the Regional Director and the State Bank
Commissioner for review and comment. Within 30 days from the receipt of
any recommended changes, the Bank shall approve the policy, which
approval shall be recorded in the minutes of the board of director's
meeting. Thereafter, the Bank shall implement and follow the policy.

[.14]14. PROFIT PLAN AND BUDGET. The plan and budget required by this
paragraph shall contain formal goals and strategies, consistent with
sound banking practices, to reduce discretionary expenses and to
improve the Bank's overall earnings and net interest income, as well
as a description of the operating assumptions that form the basis for
major projected income and expense components.

a. Within 60 days from the effective date of this ORDER, the Bank
shall submit to the Regional Director and the State Bank Commissioner,
for review and comment, a written profit plan and a
realistic/comprehensive budget for all categories of income and expense
for calendar year 2002. Within 30 days from the receipt of any comments
from the Regional Director, and after adoption of any recommended
changes, the Bank shall approve the plan and budget, which approval
shall be recorded in the minutes of the board of directors' meeting.
Thereafter, the Bank shall implement and follow the plan and budget.

b. Within 30 days from the end of each calendar quarter following
completion of the profit plan and budget required by this paragraph,
the Bank's board of directors shall evaluate the Bank's actual
performance against them, record the results of the evaluation, and
note any actions taken by the Bank in the minutes of the board of
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directors' meeting at which such evaluation is undertaken.

c. A written profit plan and budget shall be prepared for each
calendar year for which this ORDER is in effect. A copy of the profit
plan and budget shall be submitted to the Regional Director and the
State Bank Commissioner for review and comment within 30 days of the
end of each year.

[.15]15. CAPITAL ADEQUACY. For purposes of this ORDER, "capital ratio"
means the level of Tier 1 capital as a percentage of total assets. Tier
1 capital and total assets shall be calculated in accordance with Part
325 of the FDIC Rules and Regulations ("Part 325"), 12 C.F.R.
Part 325.

a. Within 30 days from the last day of each calendar quarter
following the effective date of this ORDER, the Bank shall determine,
from its Reports of Condition and Income, its capital ratio for that
calendar quarter. If it is less than 6 percent, within 60 days from
said required determination, the Bank shall submit a written plan to
the Regional Director and the State Bank Commissioner, describing the
means and timing by which the Bank shall increase such ratio up to or
in excess of 6 percent.

b. Any increase in Tier 1 capital may be accomplished by the following:

i. the sale of common stock and non-cumulative perpetual
preferred stock;

ii. the elimination of all or part of the assets classified
"Loss" in the FDIC's April 1, 2002 Report of Examination,
without incurring loss or liability to the Bank, provided any such
collection on a partially charged-off asset shall first be applied to
that portion of the asset which was not charged off pursuant to this
ORDER;

iii. the collection in cash of assets previously charged off;

iv. the direct contribution of cash by the directors and/or the
shareholders of the Bank;

v. any other means acceptable to the Regional Director; and

vi. any combination of the above.

c. If all or part of the increase in capital required by this
paragraph is to be accomplished by the sale of new securities, the
board of directors of the Bank shall adopt and implement a plan for the
sale of such additional securities, including the voting of any shares
owned, or proxies held by or controlled by them in favor of said plan.
Should the implementation of the plan involve public distribution of
Bank securities, including a distribution limited only to the Bank's
existing shareholders, the Bank shall prepare detailed offering
materials fully describing the securities being offered, including an
accurate description of the financial condition of the Bank and the
circumstances giving rise to the offering, and other material
disclosures necessary to comply with Federal securities laws. Prior to
the implementation of the plan and, in any event, not less than 20 days
prior to the dissemination of such materials, the materials used in the
sale of the securities shall be submitted to the FDIC Registration and
Disclosure Section, 550 17th Street, Room F-6043, N.W., Washington,
D.C. 20429, for its review. Any changes to be made in the materials
requested by the FDIC shall be made prior to their dissemination. If
the Regional Director allows any part of the increase in Tier 1 capital
to be provided by the sale of non-cumulative perpetual preferred stock,
then all terms and conditions of the issue, including but not limited
to, those terms and conditions relative to the interest rate and any
convertibility factor, shall be presented to the Regional Director for
prior approval.

d. In complying with the provisions of this paragraph, the Bank shall
provide to any subscriber and/or purchaser of Bank securities written
notice of any planned or existing development or of other changes that
are materially different from the information reflected in any offering
materials used in connection with the sale of Bank securities. The
written notice required by this paragraph shall be furnished within 10
calendar days of the date any material development or change was
planned or occurred, whichever is earlier, and shall be furnished to
every purchaser and/or subscriber of the Bank's original offering
materials.

e. The capital ratio analysis required by this paragraph shall not
negate the responsibility of the Bank and its board of directors for
maintaining throughout the year an adequate level of capital protection
for the kind, quality and degree of market depreciation of assets held
by the Bank.
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[.16]16. RESTRICTION ON DIVIDENDS. As of the effective date of this ORDER,
the Bank shall not declare or pay any cash dividend, capital
distribution or earnings distribution, without the prior written
consent of the Regional Director and the State Bank Commissioner.

[.17]17. AUDITS. Within 60 days from the effective date of this ORDER, the
Bank's board of directors shall adopt and implement a comprehensive
written audit program, which shall include the Bank's information
technology operations. A copy of the audit program shall be submitted
to the Regional Director and the State Bank Commissioner upon its
completion. The Bank shall thereafter implement and enforce an
effective system of internal and external audits. The internal auditor
shall make written monthly reports of audit findings directly to the
Bank's board of directors. The minutes of the meetings of the board of
directors shall reflect consideration of these reports and describe any
action taken as a result thereof.

[.18]18. INFORMATION TECHNOLOGY. Within 60 days from the effective date of
this ORDER, the Bank shall develop a detailed plan to implement or
otherwise address the specific recommendations set forth in the FDIC's
April 1, 2002 Information Technology Examination of the Bank. Upon
completion of that plan, the board of directors of the Bank shall meet,
approve, and record its approval in the minutes of said meeting.
Thereafter, the Bank's directors, officers and employees, shall
implement and follow the approved information technology plan. A copy
of the information and technology plan shall be submitted to the
Regional Director and the State Bank Commissioner.

[.19]19. VIOLATIONS OF LAW AND REGULATION. Within 30 days from the effective
date of this ORDER, the Bank shall eliminate and/or correct all
violations of law and regulation and contraventions of policy listed in
the FDIC's April 1, 2002 Report of Examination. Within 60 days from
the effective date of this ORDER, the Bank shall implement procedures
to ensure future compliance with all applicable laws, regulations, and
policies.

[.20]20. DISCLOSURE TO SHAREHOLDERS. Following the effective date of this
ORDER, the Bank shall send to its shareholders, or otherwise furnish a
description of this ORDER, in conjunction with the Bank's next
shareholder communication, and in conjunction with its notice or proxy
statement preceding the Bank's next shareholder meeting. The
description shall fully describe the ORDER in all material respects.
The description and any accompanying communication, notice or statement
shall be sent to the FDIC Registration and Disclosure Section, 550 17th
Street, N.W., Room F-6043, Washington, D.C. 20429 for review at least
20 days prior to dissemination to shareholders. Any requests for
changes made by the FDIC shall be made prior to dissemination of the
description, communication, notice or statement.

21. PROGRESS REPORTS. On the last day of the second month
following the effective date of this ORDER, and on the last day of
every third month thereafter, the Bank shall furnish written progress
reports to the Regional Director and the State Bank Commissioner,
signed by each member of the Bank's board of directors, detailing the
form and manner of any actions taken to secure compliance with this
ORDER. Such reports may be discontinued when the corrections required
by this ORDER have been accomplished and the Regional Director has, in
writing, released the Bank from making further reports.

The effective date of this ORDER shall be 10 days after its issuance by
the FDIC.

The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.

The provisions of this ORDER shall remain effective and enforceable
except to the extent that, and until such time as, any provision has
been modified, terminated, suspended, or set aside by the FDIC.